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Bitcoin booms and crypto conundrums

A plethora of issues divide opinion in 2023, but there are few more polarising subjects than cryptocurrencies.

Judging by the comments left on bangkokpost.com, much of the population thinks they’re a complete fraud that will never do anything but raise people’s hopes and then drain their savings. Among those that do see a value in digital assets, there is universal agreement that it is probably the riskiest asset ever invented but no consensus when the current crypto winter might truly burst into spring.

There is also little agreement on how quickly financial institutions will embrace blockchain-based assets, how effectively they can fight corruption and “bank the world”, and whether central bank digital currencies will curtail corruption and simplify the transactions of daily life or simply allow governments greater monitoring and control of how and where their citizens spend their money – and live their lives.

“Topp” Jirayut Srupsrisopahas long been engaged in the debate. The CEO of Bitkub Capital Group Holdings, owner of Thailand’s largest cryptocurrency exchange, found himself arguing with both the central bank and his own parents when he started the country’s first bitcoin wallet, Coins.co.th, in 2013.

“My parents have a small factory, a small shop in the Pratu Nam area in Bangkok,” he tells Dave Kendall on the Bangkok Post’s new podcast, Deeper Dive.

“I used the spare room, and after eight months the Bank of Thailand issued a formal letter to all the commercial banks saying that bitcoin could be a Ponzi scheme, the value could go to zero anytime.

“My parents were worried because they sent me all the way to Oxford, a very good university. There were a lot of expectations on me getting high paychecks but I was doing this thing that nobody understood. The Bank of Thailand , it was against it.

“So who would my parents believe, right?”

Ten years on, Mr Jirayut has raised millions of dollars while the Bitkub Group has grown steadily – 1,000% per year over the last five, he says. It is profitable and has more than 1,000 employees.

CRYPTO VOLATILITY

Meanwhile, cryptocurrencies themselves have seen violent swings in fortune. After the bull market of 2017, when bitcoin soared from $600 to $20,000, came the first crypto winter with the 2018 low at $3,400; a high of $65,000 in 2021 was followed by a crash to $16,500 in December last year before the largest digital asset recovered to around the $29,000 mark before tumbling to around $26,000 at press time.

Aside from the price volatility, the credibility and reputation of digital assets have been hit by the collapse of the altcoins , along with the bankruptcies of Three Arrows, Voyager, Celsius, FTX, Blockfi and Silvergate Bank.

Mr Jirayut blames a combination of poor banking practices and outright fraud.

“Bitkub is well-protected because we don’t mess around with customers’ money. You don’t touch it, you leave it in a separate savings account, you can’t even put it in a money market [account]. There’s … no fractional reserve system of crypto, but other exchanges seems to violate that.

“In the money business. It’s never worth it to cut corners,” he continues. “The digital asset space, blockchain space operates in a free market mechanism. There is no central bank stepping in and bailing out…

“There’ll be a natural selection, and the ones that are not doing things properly, [will] fade away, and the ones that are strong, you know, they will become critical infrastructure for each country.”

While some crypto enthusiasts earlier hoped that no governments and centralised organisations would ever become involved in the space, Sam Bankman-Fried’s FTX fraud and other high-profile failures have persuaded many that some government regulation is essential to establish confidence in digital assets.

FINDING THE BALANCE

Mr Jirayut doesn’t believe to limit access to crypto are being reflected elsewhere in the world, and advocates a balance between innovation and security.

“First, crypto cannot be fully dead or cannot be banned,” he says. “Truly, unless we shut down the internet — which is not feasible, right? But we have to talk about governance more. And I think central bankers understand this too. They don’t like crypto, but they understand that they have to live with it.”

Since central banks cannot control cryptocurrencies like bitcoin, one way they can exert power in the space is by issuing their own blockchain-based assets known as central bank digital currencies (CBDCs) — official versions of a stablecoin like USDT.

In a sense, you won’t be with Bangkok Bank or Krung Thai, you’ll effectively have an account with the Bank of Thailand. This will automate cumbersome activities like taxpaying, make transactions far quicker and simpler, and deal a body blow to graft.

“There’ll be less corruption for sure. Because everything would be transparent. No under-the-table payments, because everything would be transparent,” Mr Jirayut explained.

“Criminals will be using paper cash in the future. And normal citizens would be using CBDCs for transparency.”

There is, however, a potential darker side to these centralised digital assets: they will give authoritarian governments — of which there is no shortage in Asia — the opportunity to monitor and control every citizen’s wealth and purchases.

In theory, the ability of government critics to make purchases could be confined to a specific geographical area — they might only be allowed to purchase certain items, or they might even see their wealth docked or confiscated.

A drop on China’s social credit rating system could be reinforced with an immediate reduction in a citizen’s wealth. Blockchain, designed to decentralise transactions and asset storage, would be turned on its head, giving central authorities more control than ever before.

Mr Jirayut, however, does not see this aspect of CDBCs as a significant issue. In any case, he says, anyone who uses online banking or payment apps can already be surveilled.

“I think Thailand has 1.4 phones per person,” he tells the podcast. “And mobile banking transactions are the highest in the world in Thailand, exceeding China and the US. So clearly, people are not concerned with centralised data, a centralised database and a closed system.”

AT THE DIGITAL FOREFRONT

With the Bank of Thailand later this year or next, the kingdom is in many ways at the forefront of digitisation.

The Bitkub CEO waxes lyrical about the democratising and decentralising aspects of blockchain.

“Two billion people worldwide are currently unbanked because they … don’t make enough money per month, just to be profitable to maintain [banks’] expensive operations,” he says, using bank branches and ATMs as an example of capital costs. In the blockchain world, all you need is a mobile phone to buy anything from a Beverly Hills mansion to a Leonardo da Vinci painting – or more likely, a few square millimetres of one.

“We can create a global payment system, sharing liquidity with all asset classes by tokenisation. … We’re going to be able to democratise access in a fractional ownership manner to the rest of the world, to [anyone] with a phone that is connected to the internet, versus a person sitting on a big chair at Wall Street getting access first, right?”

Rosy projections aside, most crypto enthusiasts are likely to be more concerned with bread-and-butter issues — like the price of bitcoin.

“I think the next boom will be driven by institutional money… not just retail money, right, like the previous boom,” says Mr Jirayut, stating two requirements for that to take place.

“First, clear regulations. Institutional money cannot come into a grey space. And second, is the infrastructure advanced enough in terms of security? Institutional funds… have to make sure that they have a place to keep their assets safe.”

How long will that take?

“Our world is moving in an exponential manner,” Mr Jirayut says on Deeper Dive. “I say five years, but… could be sooner.”

“But that’s a billion-dollar question.”

Finally, what advice does the Bitkub boss have for the individual investor? Use a unique password for each account and guard your private keys, he says, while advocating 2-factor authentication, a cold-storage hardware wallet, and – anyone offering something that’s true good to be true.

And if someone does want to take the crypto plunge, how much should they invest? While some financial advisors suggest a limit for young, aggressive investors of 10-15% of personal wealth in high-risk assets, the ardent crypto evangelist offers a simpler formula.

“I would say, the money that you can afford to lose.”

Click below to watch Dave Kendall’s full interviewwith Bitkub’s ‘Topp’ Jirayut on the third episode of the new Bangkok Post podcast, ‘Deeper Dive’. Or search for ‘Deeper Dive Thailand’ wherever you get your podcasts.

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